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\. JX 















THE CONSTITUTIONALITY OF THE 
DELEGATIONS IN THE INTER¬ 
STATE COMMERCE LAW 


BY 

H. T. NEWCOMB 

of the Bar of the District of Columbia 


AU C0MM 0 .ssmK'' m N 0M J CS/ ' " The ^ 0RK of the Estate Commerce 
T N I W Inter st ate Commerce Law” “The Dimin¬ 
ished Dollar and Railway Rates” “Trusts; a Study in In¬ 
dustrial Evolution” “The Force and Effect of the 
Orders of the Interstate Commerce Commission ” 

Ihe Spoils System in Theory and Prac¬ 
tice,” Etc. 


[Reprinted from the Railway World of July i, 8 and 15, 1910.] 


PHILADELPHIA. 
RAILWAY WORLD. 
1910. 







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'l* • ' 






THE CONSTITUTIONALITY OF THE 
DELEGATIONS IN THE INTER¬ 
STATE COMMERCE LAW 


BY 

H. T. NEWCOMB 

H . . 

of the Bar of the District of Columbia 

Author of ‘'Railway Economics/' "The Work of the Interstate Commerce 
Commission/' "The New Interstate Commerce Law," “The Dimin¬ 
ished Dollar and Railway Rates/' “Trusts; a Study in In¬ 
dustrial Evolution/' “The Force and Effect of the 
Orders of the Interstate Commerce Commission/' 

“The Spoils System in Theory and Prac- * 
tice/' Etc. 


[Reprinted from the Railway World of July i, 8 and 15, 1910.] 


PHILADELPHIA. 
RAILWAY WORLD. 
1910. 


V- • 

0 






» 
















Gif* 

Aulfoor 

<irt)f»>n> 

S:p 191U 


*■. : 

• * 
• • • 


i 





CONSTITUTIONALITY OF THE DELE¬ 
GATIONS IN THE INTERSTATE 
COMMERCE LAW* 


T HE learned judge who delivered the dissenting 
opinion in the recent case of Chicago, Rock Is¬ 
land and Pacific Railway v. Interstate Com¬ 
merce Commission , 1 after quoting that portion 
of the Hepburn law 2 which confers rate-making power 
upon the Commission and calling attention to the fact that 
it had not been contended in that case that it amounted to 
an unconstitutional delegation of legislative power, con¬ 
tinued as follows: 

“I assume, in the absence of specific assault, that the pre¬ 
cedents have virtually placed that question beyond profitable 
debate.” 8 

In thus summarily disposing of the suggestion that 
Congress may have exceeded its power by attempting to 
“substitute the judgment, wisdom, and patriotism” 4 of 
the Interstate Commerce Commission for “those 

(1) Decided on August 24, 1909, 171 Fed. 680. 

(2) Approved June 29, 1906, 34 Stat. 589. 

(3) 171 Fed. 680, 690. 

(4) “One of the settled maxims in constitutional law is, that 
the power conferred upon the legislature to make laws cannot be 
delegated by that department to any other body or authority. 
Where the sovereign power of the state has located the authority, 
there it must remain; and by the constitutional agency alone the 
laws must be made until the constitution itself is changed. The 
power to whose judgment, wisdom and patriotism this high pre¬ 
rogative has been intrusted cannot relieve itself of the responsi- 


* This paper was written, as must be obvious to the reader, before the 
passage of the Wickersham-La Follette amendment (Act of June 18, 
1910), to the Hepburn Law. Section 8 of the new law, revising Sec¬ 
tion 4 of the old law, in terms gives to the Commission power to author¬ 
ize exceptions to the general rule that intermediate charges must not 
exceed those for longer distances but without indicating in any way the 
conditions which must exist to warrant such exceptions. The constitu¬ 
tionality of this delegation is, at least, doubtful, and if it fails it must 
carry the whole section with it. 

The authority to suspend changes in rates granted by Section 12 
(revision of Section 15) of the new law seems to be either a grant of 
the whole legislative power over rates, for the period of the permitted 
suspension, or a grant of the judicial power to issue an injunction. 


5 





to which” the people of the United States by their Con¬ 
stitution, have confided “power to regulate commerce 
* * * * among the several states,” * * * * 5 Judge Baker 

expressed a view which, perhaps without complete justi¬ 
fication, has of late gained a considerable number of dis¬ 
tinguished adherents. The constitutional question in¬ 
volved is one of scarcely measurable gravity and the evil 
consequences that might spring from a wrong conclusion 
are so extensive that, in spite of the warning given by 
the able jurist, it is proposed to re-examine the precedents 
which, without specific reference to any of them, he sug¬ 
gests have rendered further discussion unprofitable. Be¬ 
fore doing so, however, it will be worth while to note that 
the Supreme Court does not regard the question as by any 
means foreclosed. That it is still open is the only possible 
conclusion from the language of the Court, speaking by 
Mr. Justice Brewer, in a case decided as recently as on 
March 23, 1908. 

“It is unnecessary to define the full scope and meaning of 
the prohibition found in Section 3 of the interstate commerce 
act, or even to determine whether the language is sufficiently 
definite to make the duties cast on the Interstate Commerce 
Commission ministerial, and therefore such as may legally 
. he imposed upon a ministerial body, or legislative, and there¬ 
fore, under the Federal constitution, a matter for congres¬ 
sional action ; for within any fair construction of the terms 
‘undue or unreasonable/ the findings of the Circuit Court 
place the action of the railroads outside the reach of con¬ 
demnation.” 6 

To begin at the source of all Federal authority, the Con¬ 
stitution of the United States seemingly affords little 
basis for the suggestion that Congress can parcel out its 
powers, assigning and re-assigning them to whom it will 
and setting up various and sundry appointive deputy- 
Congresses to relieve itself of some of its more arduous 
burdens. “All legislative powers,” reads the fundamental 
law: 

“All legislative powers herein granted shall be vested in a 
Congress of the United States, which shall consist of a Sen¬ 
ate and House of Representatives.” 7 


bility by choosing other agencies upon which the power shall be 

■devolved, nor can it substitute the judgment, wisdom, and patri¬ 
otism of any other body for those to which alone the people have 

seen fit to confide this sovereign trust.” 'Cooley’s Constitutional 

Limitations, 7 Ed. 163. 

(5) Constitution of the United States, Article 1, Section 8. 

(6) Interstate Commerce Commission v. Chicago Great West¬ 
ern, 209 U. S. 108, 117, 118. The italics are the present writer’s. 

(7) Constitution of the United States, Article 1, Section 1. 

6 




“The Congress shall have power. 
******* 

“To regulate commerce with foreign nations and among 
the several states, and with the Indian tribes.” 8 

The notion that these clauses do not vest a power in 
so exclusive a manner as to preclude the transfer to a 
branch of the Executive Department of the authority ap¬ 
parently attempted to be conveyed by the Hepburn law 
depends, the writer ventures to suggest, (first) upon a 
false assumption that such a delegation must be on all 
fours with the delegation of similar powers by a State 
legislature with reference to commerce wholly within 
such state 9 and ( second ) upon a misconception of the 
nature of the powers themselves. 

It is scarcely to be questioned that the people of the 
states of the Union have the power, not restrained by any 
clause of the Federal constitution, to authorize their leg¬ 
islatures to delegate any portion of the legislative power 
committed to them. 

(8) Constitution of the United States, Article 1, Section 8. 

(9) There may still be a question whether a particular State 

constitution permits the delegation of legislative powers of this 
class. The State decisions upholding such delegations are seldom 
expressed in very general terms. The decision of the Illinois Su¬ 
preme Court in Chicago, Burlington and Quincy Railroad v. 
Jones (Decided on April 2, 1894, 149 Ill. 361, 24 L. R. A. 141), 
invariably cited in support of the theory that this exception to 
the rule exists, is by no means as broad as the purpose which it is 
usually asked to serve. It does recite certain arguments in sup¬ 
port of the exception but the Court expressly declined to rest its 
decision on those grounds, saying: “But, if it be conceded that 
making the schedule of the commission final and conclusive as 
to the rates is a delegation of legislative power, it is sufficient to 
say, in the present case, that the act of 1873 does not give to the 
schedule any such final and conclusive effect,” and “That act does 
not establish reasonable maximum rates, nor does it delegate 
to the Board of Railroad and Warehouse Commissioners the power 
to establish such rates * * * * their schedule is given the 

force and effect of prim'a facie evidence as to the reasonableness 
of the rates in a suit involving the question of such reasonable¬ 
ness.” The New York Court of Appeals in Saratoga Springs v. 
Saratoga Gas, Electric Light and Power Company (Decided on 
February 18, 1908, 191 N. Y. 123; 18 L. R. A. (N. S.) 713) held 
that there is such an exception in New York but its view seems to 
have been principally controlled by evidence that from a very early 
period the legislative bodies of that state have exercised the right 
to delegate similar powers. “Any statute, however, which at¬ 
tempts to authorize the Commission, in its judgment, to allow 
an increase of the capital stock of a corporation for such purpose 
and on such terms or conditions as it may deem advisable would 
be a delegation of legislative power and void.”—State v. Great 
Northern Railway, 100. (1907) Minn. 445; 111 N. W. 289. 

7 



“There might be a question whether, even if there were a 
clear delegation of legislative functions to other departments 
of the state government, it would be void under the Federal 
constitution. Whatever, in view of the distinct grant in the 
Federal constitution to the President, Congress, and the ju¬ 
diciary of separately the executive, legislative, and judicial 
powers of the nation, may be the power of Congress in the 
delegation of legislative functions, a very different question 
is presented when the restrictions of the Federal constitution 
are invoked to restrain like action in a state. Crimes against 
the nation must be prosecuted by indictment, yet a state may 
proceed by information. Suppose a state, by its constitution, 
grants legislative functions to the executive, or to the judi¬ 
ciary, what provision of the Federal constitution will nullify 
the action? Will the grant work an abandonment of a re¬ 
publican form of government, or be a denial of due process, 
or equal protection ?” 10 

Certainly there is nothing in the Federal constitution 
which prohibits a delegation; authorized by a state con¬ 
stitution, of whatever legislative authority or discretion 
may be involved in the exercise of supervision, by a com¬ 
mission, of railroads and other common carriers wholly 
within the state. 

“There is nothing in the statutes or Constitution of the 
United States which prevents a state from creating a board 
of railroad commissioners and what powers the board shall 
have will depend upon the law creating them, of which the 
courts of the state are the absolute interpreters.” * 11 

There is, of course, no question whatever that state 
legislatures may delegate important duties involving the 
exercise of legislative discretion. The most familiar ex¬ 
ception to the general rule which forbids the delegation 
of legislative power concerns the authority which may be 
conferred upon municipalities to establish local regula¬ 
tions and even to deal with local questions of revenue and 
taxation, 12 but the exceptions include numerous func¬ 
tions in the exercise of the police powers of the several 
states. 13 

If, as must probably be admitted, repugnance to the 
Federal constitution cannot be predicated upon a delega¬ 
tion of legislative power in a state statute, however clear 
or extensive such delegation may be, it follows that the 

(10) Michigan Central Railroad v. Powers, (1906) 201 U. S. 
245, 249. 

(11) Mobile, Jackson and Kansas City Railroad v. Mississippi, 
210 U. S. 187, 202. No question as to rates was involved in this 
case but the principle is not affected. 

(12) Cooley’s Constitutional Limitations, 7 Ed. pp. 165, 166. 

(13) Ernst Freund, The Police Power, pp. 34, 56, 57, 106, 174. 
207, 212, 217, 496, 497, 643, 654, 649. 


8 



validity of the delegation must depend wholly upon the 
constitution of the state. And this is equivalent to say¬ 
ing that the state itself is the only authority competent 
finally to pass upon the question, and that the conclusion 
of its highest court on the question of constitutionality is 
binding upon the Federal courts. 

“It is sufficient to say in reference to this contention that 
the decision of the Supreme Court of the state of Pennsyl¬ 
vania sustaining the statute is conclusive in this court, as to 
any question of conflict between it and the state constitu¬ 
tion.” 14 

It is true that, in the exercise of concurrent jurisdic¬ 
tion when called upon to administer the laws of a state, 
a Federal court may be obliged, in advance of the question 
being presented to the state court, to decide whether a 
state statute is repugnant to the state constitution 15 but 
it accepts this duty with reluctance and never unless its 
performance is necessary. 

“It is an appropriate duty, which this court is called upon 
to perform very often, to protect rights founded on the Con¬ 
stitution, laws and treaties of the United States, when those 
rights are invaded by state authority. But it is a very differ¬ 
ent thing for this court to declare that an act of a state leg¬ 
islature, passed with the usual forms necessary to its valid¬ 
ity, is void because that legislature has violated the constitu¬ 
tion of the state. 

“It has long been recognized in this court that the highest 
court of the state is the one to which such a question pro¬ 
perly belongs; and though the courts of the United States, 
when exercising a concurrent jurisdiction, must decide it for 
themselves, if it has not previously been considered by the 
state court, it would be indelicate to make such a decision 
in advance of the state courts, unless the case imperatively 
demanded it.” 16 

“If conflict with the state constitution is the sole ground 
of attack, the Supreme Court of the state is the final author¬ 
ity. * * * Undoubtedly a Federal court has the jurisdic¬ 

tion, and, when the question is properly presented, it may 
often become its duty, to pass upon an alleged conflict between 
a statute and the state constitution, even before the ques¬ 
tion has been considered by the state tribunals. All objec- 

(14) Merchants’ and Manufacturers’ National Bank of Pitts¬ 
burg v. Pennsylvania, (1897) 167 U. S. 461, 462, 463. 

(15) “But the judiciary of the United States has no general 
jurisdiction to declare acts of the several states void, unless they 
are repugnant to the Constitution of the United States, notwith¬ 
standing they are repugnant to the state constitution. Such a 
power belongs to it only when it sits to administer the local law 
of a state, and acts exactly as a state tribunal is bound to act.” 
Story on the Constitution, 5 Ed. p. 611. 

(16) Pelton v. Commercial National Bank of Cleveland, (1880) 
101 U. S. 143. 


9 



tions to the validity of the act, whether springing out of the 
state or of the Federal constitution, may be presented in a 
single suit, and call for consideration and determination. 
At the same time the Federal courts will be reluctant to ad¬ 
judge a state statute to be in conflict with the state consti¬ 
tution before that question has been considered by the state 
tribunals.” 17 

Indeed, when full consideration is given to the prin¬ 
ciple of the supremacy of the state governments within 
their legitimate fields and in matters in which they are 
not restrained by the Federal constitution, and to the 
probability that should the state court subsequently up¬ 
hold a state statute which, in advance of a state decision, 
had been pronounced incompatible with the state constitu¬ 
tion by a Federal court, the Federal court would feel 
bound to abandon its earlier conclusion, 18 the duty appears 
to be so delicate, if not unprofitable, that, if the question 
were an open one, which it is not, it might be contended 
with great force that the determination of the legislature 
of a state as to constitutionality, with reference to the 
state constitution, implied by the enactment of a statute, 
should control the Federal courts until such time as they 
might be further instructed by the state judiciary. 19 
There are very few cases in which the validity of a dele¬ 
gation by a state legislature of the legislative power to 
prescribe actual or maximum railway charges has been 
presented to a Federal court prior to its adjudication by 
the state court of last resort. Thus in the Railroad Com¬ 
mission cases (Stone v. Farmers’ Loan and Trust Com¬ 
pany), decided on January 4, 1886, the Supreme Court 
noted the fact that the highest court of Mississippi had 
held the delegation of authority, made by the legislature 


(17) Michigan Central Railroad v. Powers, (1906) 201 U. S. 
245, 291. 

(18) Greene v. The Lessee of Neal, 6 Pet. 291, 297, 301; Fair- 

field v. County of Gallatin, 100 U. S. 47, 54, 55. The decision of 
the Supreme Court of the state is controlling even though, when 
the question is presented in another case brought under the con¬ 
current jurisdiction, “it is suggested that the decision * * * * 

should not be followed because the case in which it was an¬ 
nounced did not involve a genuine controversy, but was prepared 
for the purpose of obtaining an adjudication.”—Adams Express 
Company v. Ohio State Auditor, 165 U. S. 194, 219. 

(19) Perhaps, any inconvenience to which such a rule of de¬ 
cision would subject litigants now having the right, by reason of 
citizenship, to ask the determination of such questions in the Fed¬ 
eral courts would be no greater than actually arises from the 
very proper reluctance of these courts to condemn a state statute 
on purely state grounds. But the suggestion is wholly academic. 


IO 



of that state and then questioned in the Federal court, not 
to be obnoxious to its State constitution. Undoubtedly 
then, the validity of the delegation of power under the 
State constitution was not in issue before the Supreme 
Court and its language may be regarded as tantamount 
to a declaration to that effect. 

“The Supreme Court of Mississippi has decided * * * 

that the statute is not repugnant to the constitution of the 
state, in that it creates a commission and charges it with the 
duty of supervising railroads. To this we agree and that is 
all that need be decided in this case.” 20 

In this case the Supreme Court of the United States 
exercised no independent judgment but followed, as it 
was bound to follow, the conclusion of the state court. 
Reagan v. Farmers’ Loan and Trust Company 21 fol¬ 
lows the Railroad Commission cases, but presents an in¬ 
stance in which the Supreme Court acted upon a statute 
the validity of which, under the State constitution, had 
not been passed upon by the State court. Mr. Justice 
Brewer, speaking for the Court, said in part: 

“Passing from the question of jurisdiction to the act itself, 
there can be no doubt of the general power of a state to regu¬ 
late the fares and freights which may be charged and re¬ 
ceived by railroad or other carriers and that this regulation 
can be carried on by means of a commission. Such a com¬ 
mission is merely an administrative board created by the 
state for carrying into effect the will of the state as expressed 
by its legislation. 

“No valid objection, therefore, can be made on account 
of the general features of this act; those by which the state 
has created the railroad commission and entrusted it with 
the duty of prescribing rates of fares and freights as well as 
other regulations for the management of the railroads.” 22 

Whether the foregoing expresses in any degree the fact 
that the Supreme Court is: 

“Reluctant to adjudge a state statute to be in conflict with 
the state constitution before that question has been consid¬ 
ered by the state tribunals,” 23 

is an inquiry which perhaps, can be illuminated by con¬ 
sideration of the situation presented by the particular 
case then at bar. That case reached the Supreme Court 


(20) 116 U. S'. 307; 29 L. ed. 636, 646. See also Atlantic Coast 
Line Railway v. North Carolina Corporation Commission, (1907)‘ 
206 U. S. 1. 

(21) Decided May 26, 1894, 154 U. S. 362; 38 L. ed. 1014. 

(22) 154 U. S. 362, 393, 394. 

(23) Michigan Central Railroad v. Powers, (1906) 201 U. S. 
245, 291. 


II 



on appeal from the Circuit Court of the United States 
for the Western District of Texas which had perpetually 
enjoined the Railroad Commission of that state from is¬ 
suing any further railway tariffs or from seeking to en¬ 
force those already issued which were decreed to be un¬ 
reasonable, unfair and unjust and consequently null and 
void. The Supreme Court agreed that the rates already 
established by the Commission were confiscatory and 
sustained so much of the decree of the Circuit Court as 
restrained their enforcement but reversed that portion 
which had enjoined the Commission from “proceeding to 
establish reasonable rates and regulations. 24 If the Su¬ 
preme Court had held the delegation of power to the 
Commission to be in derogation of the State constitution 
it would seem that the whole decree must have been af¬ 
firmed. But may it not, at least, be inferred that the 
court thought that, having protected the complainant in 
the Circuit Court against the only danger that was actu¬ 
ally present, that is the enforcement of confiscatory rates 
that had been named by the Commission, and having in¬ 
timated that any subsequent effort to prescribe an un¬ 
reasonably low schedule of rates could be met in the 
same manner, 25 it was not “imperatively demanded,” 26 
that, in that case, it should task itself with the further 
burden of inquiring whether the State constitution author¬ 
ized the State legislature to delegate the authority which 
the commission had undertaken to exercise. The relief 
given was adequate and effective. It fully met the real 
exigencies of the occasion and indicated the manner in 
which any others which might develop could be overcome. 
And it must not be forgotten that the National govern¬ 
ment is not permitted, “through any of its departments or 
officers,” to “assume any supervision of the police regula¬ 
tions of the states.” 

“All that the federal authority can do is to see that the 
states do not, under cover of this power, invade the sphere 
of national sovereignty, obstruct or impede the exercise of 
any authority which the Constitution has confided to the na¬ 
tion, or deprive any citizen of rights guaranteed by the Fed¬ 
eral constitution.” 27 

But even admitting, for the purposes of the argument, 


(24) 154 U. S. 362, 413. 

(25) 156 U. S. 362, 395. 

(26) Pelton v. Commercial National Bank of Cleveland, 101 
U. S. 143. 

(27) Cooley’s Constitutional Limitations, 7 Ed. pp. 831, 832. 


12 




that the Supreme Court has held that state legislatures, 
not expressly restrained therefrom by their state consti¬ 
tutions, may delegate the power to establish railway rates, 
whether actual or maximum, to be applied to the traffic 
subject to state regulation, 28 it must be conceded that the 
question presented by an effort of the Congress of the 
United States to make a similar delegation of power over 
interstate commerce is vastly different. For it is ele¬ 
mentary that the legislatures of the states may exercise 
the whole power of legislation, except as restrained by 
specific limitations in the state or Federal constitutions, 
while the Federal legislature may exercise no power not 
conferred either specifically or by necessary implication. 

“The government of the United States is one of enumerated 
powers; the governments of the states are possessed of all the 
general powers of legislation. When a law of Congress is 
assailed as void, we look in the National constitution to see 
if the grant of specified powers is broad enough to embrace it; 
but when a state law is attacked on the same ground, it is pre¬ 
sumably valid in any case, and this presumption is a conclu¬ 
sive one, unless in the Constitution of the United States or of 
the state we are able to discover that it is prohibited. We 
look in the Constitution of the United States for grants of 
legislative power, but in the constitution of the state to as¬ 
certain if any limitations have been imposed upon the com¬ 
plete power with which the legislative department of the 
state was vested in its creation.” 29 

The general rule stated by Judge Cooley is apparently 
modified as to the territories, ceded territory and the Dis¬ 
trict of Columbia, covering all of which Congress pos¬ 
sesses the full legislative power except as restrained by 
specific limitations. 

“All territory within the jurisdiction of the United States 
not included in any state must necessarily be governed by or 
under the authority of Congress. The territories are but po¬ 
litical subdivisions of the outlying dominion of the United 
States. They bear much the same relation to the general 
government that counties do to the states, and Congress may 


(28) The admission is argumentative only. “It is not neces¬ 
sary to pursue the matter further because of the recent decisions 
of the Supreme Court of the United States on rate commission 
statutes, which, while as properly urged by counsel for the ap¬ 
pellant they do not pass upon the question of conflict between 
such statutes and the constitution of the states in which they were 
enacted, do necessarily determine that the enactment of such 
statutes does not violate the Federal constitution.” Saratoga 
Springs v. Saratoga Gas, Electric Light and Power Company, 
(1908) 191 N. Y. 123, 333; 18 L. R. A. (N. S.) 713. See also 
note as to state decisions, supra, p. 7. 

(29) Cooley’s Constitutional Limitations, 7 Ed. p. 242. 


13 



legislate for them as states do for their respective munici¬ 
pal organizations. The organic law of a territory takes the 
place of a constitution, as the fundamental law of the local 
government. It is obligatory on and binds the territorial au¬ 
thorities; but Congress is supreme and, for the purposes of 
this department of its governmental authority, has all the 
powers of the people of the United States, except such as have 
been expressly or by implication reserved in the prohibitions 
of the Constitution.” 30 

Hence the admitted power to delegate legislative au¬ 
thority in matters of local control in these cases affords 
no basis for the contention that the more general right of 
delegation is held where Congress is acting by virtue of 
its enumerated and, therefore, its more restricted powers. 

There can be no comprehensive examination of the 
subject which does not lead to the conclusion that the 
inference is unwarranted which assumes that because acts 
of state legislatures assigning to commissions power, in 
their restricted fields, to fix railway rates have not been 
held by the Supreme Court to be invalid delegations of 
legislative power, equivalent authority over interstate 
commerce can constitutionally be delegated by Congress. 
It is possible, then, to proceed to an examination of the 
cases involving Congressional delegations of authority, 
unembarrassed by those decisions which relate to state 
statutes. 

In doing so, it may be as well, at the beginning, to point 
out the erroneous conclusion often predicated upon a few 
well-known sentences, not strictly essential to the con¬ 
clusion reached, contained in the opinion of the Supreme 
Court in Interstate Commerce Commission v. Cincinnati, 
New Orleans and Texas Pacific Railway. Mr. Justice 
Brewer, speaking for the majority of the Court said: 

“Congress might itself prescribe the rates; or it might 
commit to some subordinate tribunal tlvis duty; or it might 
leave with the companies the right to fix rates, subject to reg¬ 
ulations and restrictions, as well as to that rule which is as 
old as the existence of common carriers, to wit, that rates 
must be reasonable.” 81 

The words that have been italicized in the foregoing 
quotation, although plainly obiter , have frequently been 
cited as approving a Congressional delegation such as that 

(30) First National Bank of Brunswick, Maine, v. County of 
Yankton, (1880) 101 U. S. 129; 25 L. ed. 1046, 1047. As to ceded 
territory; De Lima v. Bidwell, 182 U. S. 1. As to District of 
Columbia; Stoutenburgh v. Hinnick, 129 U. S. 141. 

(31) 167 U. S. 479, 494. The italics are the present writer’s. 


14 



which is assumed to have been attempted in the Hepburn 
law. But that such an inference is incorrect is clearly de¬ 
monstrated by a later extract from the same opinion: 

“And the argument is now made, and made with force, 
that while the Commission may not have the legislative power 
of establishing rates, it has the judicial power of determining 
that a rate already established is unreasonable, and with it the 
power of determining what should be a reasonable rate and 
[to] enforce its judgment in this respect by proceedings in 
mandamus. The vice of this argument is that it is building 
up indirectly and by implication a power that is not in terms 
granted .” 3a 

These extracts make it clear that when the Court re¬ 
ferred to a power to fix rates that might have been left to 
a subordinate tribunal it meant the quasi-judicial power 
of determining what rates are reasonable and just for 
the purpose of aiding the Federal courts and to be used as 
evidence in subsequent judicial proceedings . 33 

The decisions of the Supreme Court make it perfectly 
clear that Congress cannot delegate any part of the legis¬ 
lative discretion reposed in it by virtue of its enumerated 
powers or those incidental thereto. Of course, it can and 
must, of necessity, in many cases, leave to a ministerial of¬ 
ficer some discretion as to the manner in which a minis¬ 
terial act shall be performed, although it may control or 
restrict such discretion so far as its wisdom or conveni¬ 
ence suggests; and it may empower the Executive De¬ 
partment to ascertain some fact upon which the legislative 
will, completely expressed by Congress, shall take ef¬ 
fect. These are not essentially legislative powers al¬ 
though they are powers which legislatures may usually 
exercise. 

“It will not be contended that Congress can delegate to the 
courts, or to any other tribunals, powers which are strictly 
and exclusively legislative. But Congress may certainly dele¬ 
gate to others, powers which the legislature may rightfully 
exercise itself. 

“The line has not been exactly drawn which separates those 
important subjects, which must be entirely regulated by the 
legislature itself, from those of less interest, in which a gen¬ 
eral provision may be made, and power given to those who are 
to act under such general provisions to fill up the details. 

“The difference between the departments undoubtedly is, 
that the legislature makes, the executive executes, and the 
judiciary construes the law; but the maker of the law may 

(32) 167 U. S. 479, 509. The italics are the present writer’s. 

(33) In this connection the extract from Interstate Commerce 
Commission v. Chicago Great Western (209 U. S. 108, 117, 118) 
already quoted ( supra p. 6) is very significant. 


>5 



commit something to the discretion of the other departments, 
and the precise boundary of this power is a subject of delicate 
and difficult inquiry, into which a court will not enter un¬ 
necessarily.” 84 

The opinion of the Supreme Court from which the 
foregoing extracts are taken was written by Mr. Chief 
Justice Marshall and the delegation then sustained was to 
the Federal courts to control the process of execution. Al¬ 
though the opinion described the particular power to 
which objection had been made as but “the regulation of 
the conduct of the officer of the court in giving effect to 
its judgments,” and one “a general superintendence” over 
which is “properly within the judicial province” and “al¬ 
ways so considered” it was plainly intimated that there 
was difficulty in going far enough to sustain the delega¬ 
tion. 

“It is, undoubtedly, proper for the legislature to prescribe 
the manner in which these ministerial offices shall be per¬ 
formed, and this duty will never be devolved on any other de¬ 
partment without urgent reasons. But, in the mode of obey¬ 
ing the mandate of a writ issuing from a court, so much of 
that which may be done by the judiciary, under the authority 
of the legislature, seems to be blended with that for which 
the legislature must expressly and directly provide, that there 
is some difficulty in discerning the exact limits within which 
the legislature may avail itself of the agency of its 
courts.” 85 

Prior to the decision j ust quoted it had been held in the 
case of The Aurora v. United States 36 that Congress 
could make the revival of a law, which had ceased to be 
in force, depend upon the ascertainment, by the President 
of the fact “that France had so revoked or modified her 
edicts, as that they ceased to violate the neutral commerce 
of the United States,” and his proclamation of that fact, 
the Court saying: 

“We can see no sufficient reason why the legislature should 
not exercise its discretion in reviving the act of March 1, 
1809, either expressly or conditionally, as their judgment 
should direct.” 

But the act left no discretionary alternative to the 
President, saying, merely “the President of the United 
States shall declare by proclamation.” 

It does not appear to have been actually necessary for 
the Supreme Court to have determined the question of 

(34) Wayman v. Southard, (1825) 10 Wheat. 1, 41-46. 

(35) 10 Wheat, 1, 45, 46. 

(36) 7 Cranch 382; 3 L. ed. 378, (1813). 

l6 



delegation which was discussed in Field v. Clark 37 for 
the objection on this ground pertained only to Section 3, 
of the tariff act of October 1, 1890, and was only intro¬ 
duced under the contention that this section 

“being an essential part of the system established by 
Congress, the entire act must be declared null and void” 

if the delegation was unauthorized by the Constitution. 
In the conclusion that the balance of the act would stand 
even though Section 3 should fail, Mr. Chief Justice 
Fuller and Mr. Justice Lamar (who wrote the dissenting 
opinion), although they held that the section in question 
amounted to an unauthorized delegation to the Executive 
“of those discretionary powers which the Constitution 
has vested in the law-making department” agreed with 
the six justices (there was one vacancy in the Court) who 
took the other view. The majority opinion in this case 
does not, however, materially extend the principle estab¬ 
lished in the case of The Aurora. 38 Starting with the 
explicit declaration: 

“That Congress cannot delegate legislative power to the 
President is a principle universally recognized as vital to the 
integrity and maintenance of the system of government or¬ 
dained by the Constitution,” 

it holds that: 

“The act of October 1, 1890, in the particular under con¬ 
sideration, is not inconsistent with that principle. It does 
not, in any real sense, invest the President with the power of 
legislation.” 

The section claimed to constitute an improper delega¬ 
tion directed the suspension of provisions permitting the 
free importation of certain articles, from any country pro¬ 
ducing them, whenever “the President shall be satisfied” 
that such country imposed duties on American products 
which, in view of such free importation, “he may deem to 
be reciprocally .unequal and unreasonable” and made it 
his duty to proclaim such fact and suspension. There¬ 
upon, certain rates of duty, prescribed in the Act, were to 
take effect on such products imported from such country. 
Speaking for the majority of the Court, Mr. Justice Har¬ 
lan said: 

“Congress itself prescribed, in advance, the duties to be 
levied, collected, and paid, on sugar, molasses, coffee, tea or 
hides, produced by or exported from such country, while 

(37) Decided on February 29, 1892, 143 U. S. 649; 36 L. ed. 
294. 

(38) Supra, p. 16. 


1 7 



the suspension lasted. Nothing involving the expediency or 
the just operation of such legislation was left to the deter¬ 
mination of the President. 

******* 

“As the suspension was absolutely required when the 
President ascertained the existence of a particular fact, it 
cannot be said that in ascertaining that fact and in issuing 
his proclamation, in obedience to the legislative will, he ex¬ 
ercised the function of making laws. Legislative power was 
exercised when Congress declared that the suspension should 
take effect upon a named contingeucy. What the Presideut 
was required to do was simply in execution of the law of 
Congress. It was not the making of law. He was the mere 
agent of the law-making department to ascertain and declare 
the event upon which its expressed will was to take effect.” 39 

The act of Congress of March 2, 1897, which prohibited 
the “importation of impure and unwholesome tea” and 
authorized the Secretary of the Treasury to invoke the 
aid of a board of seven tea experts, upon whose recom¬ 
mendation he was to “fix and establish uniform standards 
of purity, quality and fitness for consumption of all kinds 
of teas imported,” whereupon “all teas, or merchandise 
described as tea, of inferior purity, quality and fitness for 
consumption to such standards” were to be denied admit¬ 
tance, was held, in Buttfield v. Stranahan, Collector, 40 
not to delegate legislative power. The Court said, in 
part: 

“We are of opinion that the statute, when properly con- 


(39) It is not impossible that It may be suggested that the 
terms “shall be satisfied,” and “he may deem,” in Section 3 of the 
act of October 1, 1890, are equivalent to the term “shall be of the 
opinion,” in Section 15 of the Hepburn law, which describes the 
state of mind in which the Interstate Commerce Commission must 
find itself as to the unreasonableness of existing railway rates or 
regulations or practices before it can take up the work of substi¬ 
tuting rates fixed by itself. But the court defined the President’s 
function as that of ascertaining a fact, which is vastly different 
from forming an opinion. Again, if the fact to be ascertained had 
been whether a Federal law had been violated it could scarcely have 
been held that its ascertainment could have been left to the Ex¬ 
ecutive. An unreasonable railway rate is an unlawful rate and 
whether a law has been violated is necessarily a question for the 
judicial department. Inquiry on this question was properly made 
by the Commission when it acted as a “general referee” (Ken¬ 
tucky and Indiana Bridge Company v. Louisville and Nashville 
Railroad, 37 Fed. 567) of the Federal circuit courts and made or¬ 
ders and findings in aid of subsequent proceedings in such courts 
but it is an entirely different thing to make such an inquiry, with 
conclusive effect, as a branch either of the executive or the legis¬ 
lative department. 

(40) Decided on February 23, 1904, 192 U. S. 470; 48 L. ed. 
525. 


18 



strued, as said by the Circuit Court of Appeals, but expresses 
the purpose to exclude the lowest grades of tea, whether de¬ 
monstrably of inferior purity, or unfit for consumption, or 
presumably so because of their inferior quality. This, in 
effect, was the fixing of a primary standard, and devolved 
upon the Secretary of the Treasury the mere executive duty 

to effectuate the legislative policy declared in the statute. 

* * * * * #. * 

“Congress legislated on the subject as far as was reason¬ 
ably practicable, and from the necessities of the case was 
compelled to leave to executive officials the duty of bringing 
about the result pointed out by the statute. To deny the 
power of Congress to delegate such a duty would, in effect, 
amount to declaring that the plenary power vested in Con¬ 
gress to regulate foreign commerce could not be efficaciously 
exerted.” 

The second paragraph of the foregoing introduces, for 
the first time in any opinion of the Supreme Court, the 
suggestion of the incapacity of Congress to accomplish the 
legislative purpose without conferring power upon ex¬ 
perts in the Executive Department but it by no means 
goes so far as to intimate that power involving the exer¬ 
cise of legislative discretion can be conferred. In fact, 
the opinion plainly negatives the suggestion and distinctly 
holds that the “primary standard” was fixed by Con¬ 
gress, leaving only a ministerial duty to the Secretary of 
the Treasury. 41 

It will be necessary, hereinafter, to enquire whether the 
requirements that railway rates shall be reasonable and 
not unjustly discriminatory establish a “primary stan¬ 
dard” sufficiently definite to leave only ministerial duties 
to be performed by the agency which fixes the maximum 
rates to be permitted. 

In Union Bridge Company v. United States 42 a ma¬ 
jority of the Supreme Court held that to authorize the 


(41) Legislatures have very frequently sought expert assist¬ 
ance in the formulation of measures to be subsequently submitted 
to the legislative judgment and instances are not rare in which 
measures so prepared have been enacted without change. This 
would seem to be a better practice, in most instances, than to in¬ 
voke the expert assistance subsequent to enactment. Perhaps the 
former plan could have been as effectively followed in fixing the 
standards for teas as that which was adopted. When the English 
Parliament determined to establish maximum railway rates by 
statute the labor of formulating the schedules was left to the 
Board of Trade but that body submitted the results of its work 
to Parliament and the rates did not become effective until they 
were embodied in a subsequent act. 

(42) Decided on February 25, 1907, 204 U. S. 364; 51 L. ed. 
523. 


19 



Secretary of War to determine whether a bridge over a 
navigable stream constituted an unreasonable obstruction 
to navigation did not amount to a delegation of legislative 
power. In this decision there reappears the argument 
based upon the convenience to Congress of the assistance 
of executive officers and also the concept of a general 
rule set up by the legislature leaving details to the ex¬ 
ecutive. Mr. Justice Moody, speaking for the majority, 
said, in part: 

“Beyond question, if it had so elected, Congress, in some 
effective mode and without previous investigation through 
executive officers, could have determined for itself, primarily, 
the fact whether the bridge here in question was an unreason¬ 
able obstruction to navigation, and, if it was found to be of 
that character, could by direct legislation, have required the 
defendant to make such alterations of its bridge as were re¬ 
quisite for the protection of navigation and commerce over 
the waterway in question. But investigations by Congress 
as to each particular bridge alleged to constitute an unreason¬ 
able obstruction to free navigation; and direct legislation cov¬ 
ering each case, separately, would be impracticable, in view 
of the vast and varied interests which require national legis¬ 
lation from time to time. By the statute in question Con¬ 
gress declared, in effect, that navigation should be freed from 
unreasonable obstructions arising from bridges of insufficient 
height, width of span or other defects. It stopped, however, 
with this declaration of a general rule, and imposed upon the 
Secretary of War the duty of ascertaining what particular 
cases came within the rule prescribed by Congress, as well as 
the duty of enforcing the rule in such cases. In performing 
that duty the Secretary of War will only execute the clearly- 
expressed will of Congress, and will not, in any true sense, 
exert legislative or judicial power.” 

On May 18, 1908, a majority of the Supreme Court 
held, in an opinion delivered by Mr. Justice Moody, 43 
that a statute which required that the drawbars of all cars 
used in interstate freight service should be of uniform 
height, which height was to be fixed by the American 
Railway Association and declared by the Interstate Com¬ 
merce Commission, was within the rule established in 
Buttfield v. Stranahan 44 and that there was no “uncon¬ 
stitutional delegation of legislative power to the railway 
association and to the Interstate Commerce Commission.” 

The cases thus reviewed plainly negative the sugges¬ 
tion that there are exceptions, in addition to those pre¬ 
sented by the District of Columbia, the territories and 
ceded or conquered territory, to the rule that Congress 

(43) St. Louis, Iron Mountain and Southern Railway v. Tay¬ 
lor, 210 U. S. 281, 287; 52 L. ed. 1061, 1064. 

(44) 192 U. S. 470; 48 L. ed. 525, supra p. 18. 


20 



cannot delegate power of an essentially legislative char¬ 
acter. Assuming, then, that Congress has attempted to 
confer power upon the Interstate Commerce Commission 
which partakes of the legislative character (and that 
Congress itself possesses and might have exercised the 
power, which it has attempted to confer), the delegation 
cannot be sustained unless it appears that Congress has 
really established the “primary standard” and assigned 
to the Commission “the mere executive duty to effectuate 
the legislative policy declared in the statute.” Congress 
must, at least, 'have “legislated on the subject as far as 
was reasonably practicable.” 45 Though “the maker of 
the law may commit something to the discretion of the 
other departments” the cases leave no basis for the sug¬ 
gestion that that something may amount to a substitution 
of the judgment of executive officers for the judgment 
of Congress. It seems that to sustain a delegation the 
boundaries within which ministerial action may be exer¬ 
cised must be so narrowed, either by definition in the 
grant or by the circumstances of the case, that the consid¬ 
erations determining the choice by the minister can relate 
only to the efficiency of the course decided upon as a 
means of carrying out the legislative purpose; if those 
considerations in any way extend to questions of public 
policy, of controlling or promoting industrial enterprise, 
of fostering the interests of particular localities, of fa¬ 
voring particular methods of doing business, of curtailing 
or intensifying the effectiveness of competition, of modi¬ 
fying the economic or social organization, then, it is plain 
that the limits of a constitutional delegation have been 
exceeded. Certainly it cannot be said that Congress has 
set up the “primary standard” or legislated “as far as was 
reasonably practicable” if, for example, having enacted 
that something shall be “reasonable” and left everything 
further to the determination of the Executive Depart¬ 
ment, it appears that there are many possible standards of 
reasonableness which might be applied and that the selec¬ 
tion of one standard rather than another would produce 
widely different and far-reaching social and economic 
consequences. 

The clauses of the Hepburn law which, according to 
the administrative theory, give the force of law to the 
orders of the Interstate Commerce Commission are: 

“All orders of the Commission, except orders for the pay- 

(45) Buttfield v. Stranahan, supra p. 18. 


21 



mem oi money, shall take effect within such reasonable time, 
not less than thirty days, and shall continue in force for such 
period of time, not exceeding two years, as shall be prescribed 
in the order of the Commission, unless the same shall be sus¬ 
pended or set aside by the Commission or be suspended or set 
aside by a court of competent jurisdiction.” 46 

“It shall be the duty of every common carrier, its agents 
and employes, to observe and comply with such orders so long 
as the same shall remain in effect. 

“Any carrier, any officer, representative, or agent of a 
carrier, or any receiver, trustee, lessee, or agent of either of 
them, who knowingly fails or neglects to obey any order made 
under the provisions of Section fifteen of this act shall forfeit 
to the United States the sum of five thousand dollars for 
each offense. Every distinct violation shall be a separate of¬ 
fense, and in case of a continuing violation each day shall be 
deemed a separate offense.” 47 

The first section of the interstate commerce law, as 
amended on June 29, 1906, by the Hepburn law, author¬ 
izes the Commission to order any carrier subject to the 
act to: 

“Construct, maintain and operate upon reasonable terms a 
switch connection with any * * * * lateral, branch line 

of railroad, or private side track which may be constructed 
to connect with its railroad, where such connection is rea¬ 
sonably practicable and can be put in with safety and will 
furnish sufficient business to justify the construction and 
maintenance of the same.” 

The sixth section of the act, after directing that no 
change in rates shall be made except after thirty days’ no¬ 
tice to the Commission and to the public and establishing 
certain requirements as to publishing, posting and filing 
rate schedules authorizes, by the following clauses, two 
classes of orders. 

“ Provided , That the Commission may in its discretion and 
for good cause shown, allow changes upon less than the notice 
herein specified, or modify the requirements of this section 
in respect to publishing, posting and filing of tariffs, either in 
particular instances or by a general order applicable to spe¬ 
cial or peculiar circumstances or conditions.” 

“The Commission may determine and prescribe the form in 
which the schedules required by this section to be kept open 
to public inspection shall be prepared and arranged and may 

(46) Section 15. 

(47) Section 16. The section also provides for a civil suit in 
the name of the United States to enforce this penalty. Section 
twenty provides a different penalty, recoverable in the same man¬ 
ner, for violation of an order prescribing the form of accounts. 
Of course the penalty clauses might be unconstitutional without 
affecting the rest of the act. Reagan v. Farmers Loan and Trust 
Company, 154 U. S. 362, 395, 396. Probably the same is true of 
the other clauses quoted above. 


22 



change the form from time to time as shall be found expe¬ 
dient.” 

Whatever rate-making power the Commission may ex¬ 
ercise is conveyed by the fifteenth section. These orders 
are to be issued “after hearing 48 on a complaint.” The 
first class of orders authorized by this section comprises 
those to be issued when the Commission 

“shall be of the opinion that any of the rates, or charges 
whatsoever, demanded, charged, or collected by any common 
carrier or carriers subject to the provisions of this act, for 
the transportation of property as defined in the first section 
of this act, or that any regulations or practices whatsoever 
of such carrier or carriers affecting such rates, are unjust 
or unreasonable, or unjustly discriminatory or unduly pre¬ 
ferential or prejudicial, or otherwise in violation of any of the 
provisions of this act,” 

and, after forming such opinion has proceeded 

“to determine * * * * what will be the just and 

reasonable rate or rates, charge or charges, to be thereafter 
observed in such case as the maximum to be charged; and 
what regulation or practice in respect to such transportation 
is just, fair, and reasonable to be thereafter followed.” 

The order to be made under such circumstances is defined 
in the following language: 

“that the carrier shall cease and desist from such violation, 
to the extent to which the Commission find the same to exist, 
and shall not thereafter publish, demand, or collect any rate 
or charge for such transportation in excess of the maximum 
rate or charge so prescribed, and shall conform to the regula¬ 
tion or practice so prescribed.” 

Subsequent clauses in the same section authorize the 
Commission, under certain conditions to order the estab¬ 
lishment of through routes and by order to fix maximum 
rates over such routes, to prescribe the division of such 
rates among the different carriers in the routes and to 
order that not more than a certain maximum shall be paid 
by a carrier to the owner of property transported for the 
use of any instrumentality employed in the transporta¬ 
tion which is owned by the latter or for any service ren¬ 
dered by him in connection with such transportation. 

Section 20 authorizes orders requiring annual, monthly 
and special reports from carriers, prescribing the con¬ 
tents of such reports and the manner in which they shall 

(48) This is the phrase used as to joint rates and transpor¬ 
tation services rendered by owners of the property carried. As to 
the other class of orders the hearing required is defined as a “full 
hearing.” A similar but more elaborate qualification limits the 
authority to issue the orders described in Section 1. 


2 3 



be rendered, fixing the time within which they shall be 
filed and requiring, “as near as may be,” a uniform sys¬ 
tem of accounting. This section also contains authority 
for orders of great importance relating to the form of ac¬ 
counts, as follows: 

“The Commission may, in its discretion, prescribe the forms 
of any and all accounts, records, and memoranda to be kept 
by carriers subject to the provisions of this act, including 
the accounts, records, and memoranda of the movement of 
traffic as well as the receipts and expenditures of moneys 
* * * * and it shall be unlawful for such carriers to 

keep any other accounts, records, or memoranda than those 
prescribed or approved by the Commission, ****>> 

It will not be expedient to consider each of these grants 
of power separately and at length, although it is. by no 
means impossible that one or more of them may be con¬ 
stitutional even though all the others should be found to 
be obnoxious to the fundamental law. The words “upon 
reasonable terms” in the grant quoted from Section I evi¬ 
dently make applicable to it any considerations that would 
affect the more general grants in Section 15. The 
power to amend the sixth section “in its discretion and 
for good cause shown” attempted to be delegated by the 
clause first quoted from that section, being controlled by 
no “primary standard” whatever seems plainly beyond 
the power of Congress and also, to be so inextricably 
connected with the provisions as to notice of changes in 
rates that its failure must carry with it all the limitations 
on the right to change rates contained in the section; a 
most unfortunate result. On the other hand, the second 
delegation in that section, of the right to prescribe the 
form of tariffs, would appear to convey only a ministerial 
duty and, of itself, to be well within the limits of the func¬ 
tions that may be delegated. The really significant dele¬ 
gations are those of the fifteenth and twentieth sections; 
the first as to rates, the second as to accounts. 

The delegations in the fifteenth section are, of course 
controlled by the requirements and prohibitions of the 
first and third sections. These sections go no further 
than to require that “all charges * * * * shall be 

just and reasonable,” to prohibit “every unjust and un¬ 
reasonable charge” 49 and to prohibit giving “any undue 
or unreasonable preference or advantage” or creating 
“any undue or unreasonable prejudice or disadvantage” 
to the profit or injury of any person, locality or class of 

(49) Section 1. 


24 



traffic. 50 These are the standards set up by the law. 
The question is whether as “primary standards” they are 
“sufficiently definite to make the duties cast on the In¬ 
terstate Commerce Commission ministerial.” 51 Has 
Congress, in this respect, “legislated on the subject as far 
as was reasonably practicable” and left to the Commis¬ 
sion only “the mere executive duty to effectuate the legis¬ 
lative policy” ? 52 

That there are numerous standards which might be 
made the tests of reason and justice has frequently been 
urged; that there is certainty in any standard that might 
be adopted has, as frequently, been denied. Even in the 
dissenting opinion of Judge Baker, already quoted, 53 the 
wide range of selection permitted to the Commission, if 
this delegation is valid, was plainly stated, as will be seen 
from the following: 

“One possible system of rate-making would be to adopt the 
postage method of uniform charge throughout the whole coun¬ 
try, irrespective of distance. Another would be to divide the 
country into zones, and adopt a uniform charge from any 
place within one zone to any place within another zone, irre¬ 
spective of distance. Another system would be to base the 
charge absolutely upon mileage. None of these has ever be¬ 
come established on American railroads though I believe the 
use of any of them, because not expressly denied, was open to 
the Commission.” 54 

The foregoing by no means exhausts the list of diver¬ 
gent and possible standards. It leaves out of the account 
the cost of service standard, the value of the service to the 
shipper standard, the taxation standard, the fair return 
on a fair valuation standard, the what-the-traffic-will- 
bear standard, all standards that have been proposed 
with confidence and sincerity and urged with plausibility 
and vigor. Can it be possible that a choice of such tre¬ 
mendous importance to the economic welfare of every 
citizen, every industry and every locality can effectively 
be delegated under a government by the people, Repub- 

(50) Section 3. 

(51) Interstate Commerce Commission v. Chicago Great 
Western, 209 U. S. 108, 117, 117; supra, p. 6. 

(52) Buttfield v. Stranahan, 192 U. S. 470; supra, p. 18. 

(53) Supra, p. 5. 

(54) Dissenting Opinion, Chicago, Rock Island and Pacific 
Railway v. Interstate Commerce Commission, Circuit Court, N. D. 
Illinois E. D., 171 Fed. 680, 692. The significance of this extract 
from a dissenting opinion is not diminished by the fact that 
Judge Baker took extreme ground in support of the validity of the 
delegation. 


25 



lican in form and presumably intended to be so in sub¬ 
stance, to an appointive board? Of orders based upon 
a selection among these different standards it would seem 
proper to speak in language similar to that used by the 
Supreme Court in the Import Rates case. 55 

“* * * * such orders are instances of general legisla¬ 

tion requiring an exercise of the law-making power and 
* * * * instead of being regulations calculated to pro¬ 

mote commerce and enforce the express provisions of the act, 
are themselves laws of wide import, destroying some 
branches of commerce that have long existed, and undertak¬ 
ing to change the laws and customs of transportation in the 
promotion of what is supposed to be public policy.” 

In the same opinion the Supreme Court defined the 
words “reasonable,” “unjust,” “undue,” and “unreason¬ 
able,” as used in the second and third sections in terms 
clearly incompatible with the theory that they are suffi¬ 
cient to limit a discretion that is merely ministerial. 

“The very terms of the statute, that charges must be rea¬ 
sonable, that discrimination must not be unjust, and that 
preference or advantage to any particular person, firm, cor¬ 
poration, or locality must not be undue or unreasonable, 
necessarily imply that strict uniformity is not to be en¬ 
forced; but that all circumstances and conditions which rea¬ 
sonable men would regard as affecting the welfare of the 
carrying companies, and of the producers, shippers, and con¬ 
sumers, should be considered by a tribunal 66 appointed to 
carry into effect and enforce the provisions of the act.” 67 

But the Supreme Court has expressly declared that the 
rate-making power is legislative as distinguished from 
administrative; that is, not merely partaking of the legis¬ 
lative character or quasi-legislativt, such as may be dele¬ 
gated, but actually and exclusively legislative. Is such an 
interpretation to attach undue significance to the follow¬ 
ing? 

“The power to prescribe a tariff of rates for carriage by a 
common carrier is a legislative and not an administrative or 
judicial function, and, having respect to the large amount of 
property invested in railroads, the various companies engaged 
therein, the thousands of miles of road, and the millions of 
tons of freight carried, the varying and diverse conditions at- 


(55) Texas and Pacific Railroad v. Interstate Commerce Com¬ 
mission, (1896) 162 U. S. 197, 234. 

(56) It should be borne in mind that when this decision was 
rendered the “tribunal,” that is to say, the Commission acted 
merely as “general referee” for the Federal circuit courts. No 
one then contended that its orders had statutory force. 

(57) 162 U. S. 197, 219. 


26 



taching to such carriage, is a power of supreme delicacy and 
importance.” 68 

Again in the same opinion the Court said: 

“It is not to be supposed that Congress would ever au¬ 
thorize an administrative body to establish rates without in¬ 
quiry and examination; to evolve, as it were, out of its 
own consciousness, the satisfactory solution of the difficult 
problem of just and reasonable rates for all the various 
roads in the country.” 69 

When seeking to determine the essential nature of the 
power of rate-making, even the Supreme Court of the 
United States can scarcely be considered a higher au¬ 
thority than the exceedingly able body of men who con¬ 
stitute, and have constituted, the Interstate Commerce 
Commission. Selected in most cases from among those 
Americans distinguished in statecraft, in jurispru¬ 
dence or in other activities, the Commissioners, with 
barely an exception, have striven with ability and devo¬ 
tion to qualify themselves as experts in transportation 
economics, for the difficult and arduous duties entrusted 
to them. What have they said, in formal annual re¬ 
ports to Congress, in opinions in decided cases, and as 
individuals in well-considered expressions of their views, 
concerning the nature of the discretion which must be 
exercised in determining the matters to be prescribed in 
orders issued under Section 15? Through all the mass of 
illuminating discussion suggested by these references 
runs the plain declaration that the questions are broad 
questions of public policy, that the discretion to be exer¬ 
cised is that of choosing among different policies that 
which is deemed most conducive to general welfare; a 
choice, it is submitted, which only the legislature is consti¬ 
tutionally competent to make. This idea is very clearly 
expressed in the First Annual (1887) Report of the Com¬ 
mission, in language which may definitely be attributed to 
Hon. Thomas M. Cooley, the great jurist whose distin¬ 
guished service as chairman of that body is by no means 
least among his many notable services to the public. 

“The question of the reasonableness of rates involves so 
many considerations and is affected by so many circum¬ 
stances and conditions which may at first blush seem foreign, 
that it is quite impossible to deal with it on purely mathe¬ 
matical principles, or on any principles whatever, without a 


(58) Interstate Commerce Commission v. Cincinnati, New Or¬ 
leans and Texas Pacific Railway, (1897) 167 U. S. 479, 505. 

(59) 167 U. S. 479, 509. 


27 



consciousness that no conclusion which may be reached can 
by demonstration be shown to be absolutely correct. 

“* * * * to take each class of freight by itself and 

measure the reasonableness of charges by reference to the 
cost of transporting that particular class, though it might 
seem abstractly just, would neither be practicable for the 
carriers nor consistent with the public interest. 

“The public interest is best served when the rates are so 
apportioned as to encourage the largest practicable exchange 
of products between different sections of our country and 
with foreign countries; and this can only be done by making 
value an important consideration; and by placing upon the 
higher classes of freight some share of the burden that on 
a relatively equal apportionment, if service alone were con¬ 
sidered, would fall upon those of less value.” 60 

In another place in the same report Judge Cooley 
wrote that the method of apportioning railway charges 
among different services which would be best for the 
country must be based on a principle similar to that to 
which rates of taxation ought to be adjusted. 

“* * * * to apportion the whole cost of service among 

all the articles transported, upon a basis that should consider 
the relative value of the service more than the relative cost 
of carriage. * * * * Such a system of rate-making 

would in principle approximate taxation; the value of the 
article carried being the most important element in determin¬ 
ing what shall be paid on it.” 81 

No one has ever suggested that Congress could dele¬ 
gate to any other agency the fixing of a lawful rate of 
taxation yet the idea that the principles of rate-making 
and the consequences of following one theory or another 
approximate those of taxation is prominent in the re¬ 
ports of the Commission. The following appeared in 

1895: 

“The guardianship 62 of the public interest so far as inter¬ 
state commerce is concerned is, under the existing law, en¬ 
trusted to this Commission. The nature of that interest con¬ 
sists primarily in just and equitable rates for transportation 

(60) First Annual (1887) Report of the Interstate Commerce 
Commission, p. 36. 

(61) First Annual (1887) Report of the Interstate Commerce 
Commission, p. 31. 

(62) This paternalistic theory of the Commission’s functions 

is very apparent in the reports issued during the ten or twelve 
years immediately prior to the passage of the Hepburn law. One 
is compelled to suspect that the words “public interest” are used 
in a rather narrow sense for in another annual report (1897) the 
Commission said: “The purpose of the act was to provide a means 
by which the public could array itself against the carrier, 
* * * *»—Eleventh Annual Report of the Interstate Com¬ 

merce Commission, p. 19. 



and in equal service for equal payment to all patrons of the 
railways; time, place, and other conditions being taken into 
consideration. No one who understands the intricacies of 
transportation would care to assert that the determination 
of a just rate, or the decision as to what constitutes dis¬ 
crimination, is an easy task. To some extent the principles 
upon which taxation rests must be allowed in fixing a just 
rate; to some extent the result of the rate upon the develop¬ 
ment of industries must be taken into account in all decisions 
which the Commission is called upon to make; to some extent 
every question of transportation involves moral and social 
considerations, so that a just rate cannot be determined in¬ 
dependently of the theory of social progress.” 63 

Whose theory of social progress? What principles of 
taxation? To what extent is “some extent” in each case 
and who shall declare the relative weight of each class of 
considerations? Are these primary standards fully de¬ 
fined? Has Congress here legislated as far as reason¬ 
ably practicable and left only the execution of the fully 
expressed legislative will to this ministerial body? Or 
take this from the report rendered at the close of the 
year 1904. “The injury,” meaning the damage inflicted 
by unjust discriminations “between rival localities or 
competing articles of traffic,”— 

“The injury * * * * can b e redressed only by the ex¬ 

ercise of sufficient authority to readjust rate schedules to be 
observed in the future on the basis of relative justice.” 64 

Not less disconcerting to those who regard the words 
“just” and “reasonable” as setting up definite standards 
for the adequate guidance of ministerial officers, is the 
following: 

“To give each community the rightful benefits of location, 
to keep different commodities on an equal footing, so that 
each shall circulate freely and in natural volume, and to 
prescribe schedule rates which shall be reasonably just to 
both shipper and carrier, is a task of vast magnitude and 
importance. In the performance of that task lies the great 
and permanent work of regulation.” 68 

If this is definite let some one appraise the “rightful” 
worth of the location of some one town or city; let some 
one tell what is an “equal footing” for wheat and dress¬ 
ed pork moving between Chicago and the Atlantic sea- 

(63) Ninth Annual (1895) Report of the Interstate Commerce 
Commission, p. 59. The Commission naively adds: “This argu¬ 
ment is perhaps as ‘indefinite as it is comprehensive.’ ” 

(64) Eighteenth Annual (1904) Report of the Interstate Com¬ 
merce Commission, p. 9. 

(65) Seventh Annual (1893) Report of the Interstate Com¬ 
merce Commission, p. 10. 


29 



board; let some one express in ton-miles the movement of 
pianos which would be equivalent to free circulation 
throughout the United States; let some one put in figures 
the “natural volume” in which boots and shoes ought to 
move from Massachusetts to Minnesota. Can the Com¬ 
mission answer these questions? Certainly not, witness 
the following: 

“It is often difficult to say what constitutes a reasonable 
rate, and more difficult to give in detail the reasons that lead 
to that conclusion. Although the Supreme Court of the 
United States has furnished certain rules by which to test 
the reasonableness of transportation charges, and although 
this Commission has endeavored to apply those rules, yet 
whenever it has interrogated railway officials as to whether 
or not they are governed by them when making rates of trans¬ 
portation, they have invariably answered in the negative and 
said that to do so would be impracticable. The carriers do 
not apparently possess the necessary data for that purpose 
and there is at present no other source from which the Com¬ 
mission can obtain such data.” 66 

“We have endeavored to find some fundamental principle 
by the application of which this dispute might be laid at 
rest, but entirely without success. It is said that a fair dif¬ 
ferential is one which would give to these several ports the 
traffic to which they are entitled. It is also said that these 
several ports are entitled to what part of this traffic they can 
obtain under a fair differential. New York urges that its fa¬ 
cilities upon the ocean must not be interfered with, while Bal¬ 
timore and Philadelphia assert with equal positiveness that 
they must not be deprived of their advantages upon the land. 
While there is no fundamental principle, however, which can 
be applied there are certain fundamental considerations which 
should be kept in mind.” 87 

Bearing in mind the fact that the Commission recog¬ 
nized that the differentials which it established in the case 
from the decision in which the foregoing is quoted would 
control the distribution of the “enormous export traffic,” 
of the North Atlantic seaports, not only among the car¬ 
riers reaching those ports but also among the ports them¬ 
selves, it must be worth while to note that the very next 
paragraphs define the standards for that case in terms as 
indefinite as any herein quoted. 

“If it can be properly done, these ports should all be kept 
open for the transaction of this export business upon such 

(66) Report and Opinion of the Interstate Commerce Commis¬ 
sion in Marten v. Louisville and Nashville Railroad, 9 I. C. C. 
Rep. 581, 597. Decided on November 21, 1903. 

(67) Report and Opinion of the Interstate Commerce Commis¬ 
sion in the Matter of Differential Freight Rates to and from 
North Atlantic Ports (April 27, 1905,) 11 I. C. C. Rep. 13, 62. 


30 



terms that each one may fairly compete for it. No marked 
advantage should be given, certainly not by the creation of 
artificial conditions, to any one port over the other. The 
ideal condition would be the establishment of such rates that 
enterprise at either port in the way of improvement in ser¬ 
vice or facilities might be rewarded by increased business and 
that there might exist that healthy struggle of locality 
against locality which is the best security for proper commer¬ 
cial development. This is justly demanded by the interests 
of the communities involved. 

“In disposing of this question the interests of the carriers 
which serve these communities should be none the less kept 
in view. If, again, it can be properly done, these rates should 
be so adjusted that this competitive traffic will be fairly 
distributed between the different lines of railways which 
serve these ports.” 68 

Other quotations, selected almost at random from the 
vast mass of material to the same effect, showing the pre¬ 
vailing idea that broad and great questions of public 
policy are involved and that they must be settled without 
the application of any clear and definite standards, are 
inserted without additional comment. 

“The mandate of the statute is that all rates must be rea¬ 
sonable and just, but how the reasonableness and justice of a 
rate are to be determined is not prescribed by the statute, 
nor has any satisfactory test been evolved by transportation 
experts. * * * * A rate that might be regarded as 

reasonable and just by a producer and shipper, might, from a 
carrier’s standpoint, be deemed extremely unreasonable and 
unjust, and so, conversely, a rate that a carrier might claim 
to be reasonable in itself, and that it might support with 
strong reasons based upon the cost of service, the quantity of 
the business and the characteristics of its line of road, might 
exhaust the greater part of the proceeds of the producer’s 
commodity, and be destructive to his interests. It is only 
stating a truism, therefore, to say there is no recognized test 
of a rate mutually reasonable for a carrier and for a pro¬ 
ducer of the traffic.” 69 

“Within certain limits, therefore, it is good policy for the 
railway manager to increase his tonnage, even at the expense 
of reducing the rate per ton. Just how far this rule applies 
no one can tell. The merchant who buys an article for a de¬ 
finite price knows when he sells it whether he makes or loses 
by the transaction; and the manufacturer, as a rule, has a 
pretty accurate idea of the cost of production, but the rail¬ 
road operator can not ordinarily say whether he should or 


(68) 9 I. C. C. Rep. 13, 62. The italics are the present writ¬ 
er’s and are intended to call attention to words which express con¬ 
ditions that one would like to have further defined. 

(69) Report and Opinion of the Interstate Commerce Com¬ 
mission in Delaware State Grange v. New York, Philadelphia and 
Norfolk Railway, (1891) 3 Int. Com. Rep. 554. 


31 



should not as a matter of good policy take traffic at a certain 
price.” 70 

“The freight rate is a complex problem when applied to al¬ 
most all competitive traffic. Very few people not acquainted 
with the subject have any idea how difficult the solution of 
that problem is. Kates between points which, to a superficial 
observer, have no connection are in fact interdependent. The 
rate from New York to New Orleans by water may control 
the rate from Chicago to St. Louis by rail. In fixing par¬ 
ticular rates the claims of different transportation lines , dif¬ 
ferent markets, and different commodities all have to be con¬ 
sidered and offset one against another ” 71 

“We think a broad view of what constitutes profitable pol¬ 
icy for a carrier includes the increase of trade at all sta¬ 
tions and the building up of the various localities along its 
line, and while a carrier may find some temporary or com¬ 
parative profit in concentrating traffic in large cities, the 
interests of the public, generally speaking, lie in an opposite 
direction; * * * *” 73 

“It is plain that until there be fixed, either by legislative 
enactment or by judicial interpretation, some definite basis 
for the valuation of railroad property, and some limit up to 
which that property shall be allowed to earn upon that valu¬ 
ation that there can be no exact determination of these ques¬ 
tions. In the absence of such a standard, the tribunal, wheth¬ 
er court or commission, which is called upon to consider the 
matter, can only upon the whole exercise its best judg¬ 
ment.” 7,# 

“Now, the fixing of a railway rate is in its nature legisla¬ 
tive rather than judicial. There is no standard by which it 
can be determined. It might be thought that the price charg¬ 
ed for a transportation service ought to be governed by the 
cost of rendering that service; but it is agreed on all hands 
that, assuming the possibility of ascertaining the cost, still 
our interstate rates could not be made on that basis. A 
comparison with other rates is of but little value, since con¬ 
ditions are seldom the same in two cases. The element of 
competition plays an important part, and one of the most 
difficult questions to decide is how far a carrier may properly 
discriminate in view of competitive conditions. Assuming 
that the amount of money which a railroad ought to earn is 
fixed, from what source shall it derive that amount? How 
much shall come from the passenger business? How much 
from freight? What rate shall be applied to a particular 
species of freight as compared with other commodities? In 
determining the justice or reasonableness of a particular rate 
all these factors, and many others, may present themselves 

(70) Twelfth Annual (1898) Report of the Interstate Com¬ 
merce Commission, p. 17. The italics are the present writer’s. 

(71) Twelfth Annual (1898) Report of the Interstate Com¬ 
merce Commission, p. 15. The italics are the present writer’s. 

(72) Marten v. Louisville and Nashville Railroad, (1903) 9 I. 
C. C. Rep. 581, 599. 

(72*) Report and Opinion of the Interstate Commerce Com¬ 
mission, Re Advance in Freight Rates, (1902) 9 I. C. C. Rep. 391. 


32 



for consideration. They are proportionately taken into ac¬ 
count by the traffic official who fixes the rate in the first in¬ 
stance, and they must be considered by the administrative 
body which revises that rate. It is finally a question of judg¬ 
ment, what, taking everything into account, ought fairly to 
be done.” 73 

“It is not essential to this line of thought to express full 
agreement with the extreme advocates of valuation whose ar¬ 
guments seem to imply that, if the value of the property is 
known, a reasonable rate can be determined by mathematical 
calculation. Many other considerations are involved in the 
problem, notably the manner in which the rate proposed will 
affect the industrial development of the country.” 74 

“As I said, I am very far from believing that there should be 
anything more than the most inconsiderable tendency, if any 
at all, toward the adjustment of rates on a mileage basis, and 
I think the prosperity of the railroads, the development of 
the different sections of the country and their industries jus¬ 
tify, the making of rates upon what might be called a com¬ 
mercial basis; but do you realize what an enormous power 
that is putting into the hands of the railroads? That is the 
power of tearing down and building up. That is the power 
which might very largely control the distribution of indus¬ 
tries. And I want to say in that connection that I think on 
the whole it is remarkable that that power has been so 
slightly abused. 

W ***** * 

“Suppose it were true that a more potent exercise of gov¬ 
ernment authority in the adjustment of rates tended some¬ 
what to increase the recognition of distance, with the result 
of producing a greater diffusion of industry rather than its 
concentration. * * * * I cannot believe that all those 

institutions, laws, administrations, which operate to the con¬ 
centration of industries and population are to be commended. 
They may result in greater aggregate wealth for the coun¬ 
try. I am prepared to admit that they do; but do they re¬ 
sult in happier homes, better lives, greater social comfort? 
I have some doubt of it.” 75 

“There is no absolute standard of a reasonable freight rate, 
and there is, therefore, no absolute right upon the part of 
a railroad to charge a particular rate.” 76 

“The principles which lie at the basis of just railway 
schedules arise from a study of the theory of taxation. As 


(73) Hon. Charles A. Prouty, member of the Interstate Com¬ 
merce Commission, in the American Monthly Review of Reviews , 
May, 1906. 

(74) Twenty-second (1908) Annual Report of the Interstate 
Commerce Commission, pp. 83-4. 

(75) Honorable Martin A. Knapp, Chairman of the Commis¬ 
sion, Testimony taken by the Senate Committee on Interstate 
Commerce, May, 1905, Vol. IY, pp. 3298, 3299. Here is an im¬ 
portant and interesting “theory of social progress,” on which rates 
might be based. But is it the theory which Congress would adopt? 

(76) Twenty-third Annual (1909) Report of the Interstate 
Commerce Commission, p. 7. 

9 

'■9*3 

* ) 

> > P 


33 




in taxation payment for the support of government should 
be in proportion to the ability of citizens, so the contribu¬ 
tions of shippers to the fund necessary to meet the legitimate 
demands of railways should be made from various classes 

of goods in proportion to their ability to bear the charges. 

******* 

“A just rate does not mean a rate which a particular ship¬ 
per can pay for particular goods, but rather a rate which, 
when enforced and maintained, entails in a community just 
and commendable results. The question involved in this 
controversy is not simply commercial in character, it is at the 
same time a question of public policy, and as such, like all 
questions of a political character, demands the fullest and 
completest knowledge respecting it.” 77 

The principles of rate-making are not only too indefi¬ 
nite to permit the delegation of that duty, at least without 
very definite expression of the legislative will as to the 
rules which shall guide the acts of the grantee of power, 
but the consequences attending the exercise of the legis¬ 
lative authority over rates are so vast that it is not safe to 
permit an infraction of the constitutional rule which has 
wisely united legislative power and legislative responsi¬ 
bility to the end that a dissatisfied constituency may 
quickly substitute a satisfactory legislative agent. Said 
the Commission, in 1904: 

“It is probably near the truth to say that the cases now 
pending before the Commission directly or indirectly affect 
almost every locality, and therefore nearly all of the people 
of the United States.” 78 

In its report for 1897 the Commission quoted from the 
decision of the Supreme Court in Interstate Commerce 
Commission v. Cincinnati, New Orleans and Texas Pa¬ 
cific Railway 79 as follows: 

“The importance of the question can not be overesti¬ 
mated. Billions of dollars are invested in railroad proper¬ 
ties. Millions of passengers, as well as millions of tons of 
freight, are moved each year by the railroad companies, and 
this transportation is carried on by a multitude of corpora¬ 
tions working in different parts of the country and sub¬ 
jected to varying and diverse conditions.” 

• (77) Professor Henry C. Adams, Statistician to the Interstate 
Commerce Commission. “Service of a Bureau of Railway Statis¬ 
tics and Accounts,” a paper read before the National Convention 
of Railroad Commissioners, April 19-20, 1893, and published in its 
proceedings, see pages 51 and 52. While Professor Adams is an 
employee and not a member of the Commission he is an economist 
of distinction and, on this occasion, no doubt expressed the views 
of the Commission as well as his own. 

(78) Eighteenth Annual (1904) Report of the Interstate Com¬ 
merce Commission, p. 29. 

(79) 167 U. S. 479, 494. 


34 



Commenting upon the foregoing the Commission re¬ 
marked that “from the railroad standpoint” the Supreme 
Court had stated “forcibly and justly the importance of 
the question” and continued: 

“We may suggest that it is of even greater importance 
from the public standpoint. * * * * A very slight 

change in rates upon any of the staple commodities amounts 
to an enormous sum in the aggregate. In most articles of 
daily use the transportation charge is a large and often the 
larger part of the cost to the consumer. The freight rate 
may determine whether the Kansas farmer shall burn his 
corn for fuel or send it to market. The traffic manager may 
decree whether an industry shall exist or a locality flour¬ 
ish. It is not only the billions of dollars invested in railway 
properties which this question touches, but the prosperity and 
welfare of the people at large throughout the whole na¬ 
tion.” 80 

Two years earlier the Commission had said: 

“Where the cost of an article is so much affected by the ex¬ 
pense incurred in bringing it from the place of production, 
the relative rates applied to competing towns determine to a 
great extent the volume of their business and the measure 
of their growth. 

“The power of the railroads in this direction is enormous. 
They can build up or destroy a commercial center almost at 
will. They can raise or reduce the prices of agricultural 
products, and so enhance or depress the value of wide areas 
of land. They can decree that one town shall be enriched 
by the impoverishment of its rival; that one community 

shall languish while another flourishes. 

* * * * * * * 

“Generally speaking, there is more or less competition in 
the consuming markets between raw materials and their 
manufactured products. If either of these rivals is unduly 
aided through the charges fixed by the public carrier indi¬ 
viduals and communities may receive incalculable injury. 
Upon the fair adjustment of rates between such commodities, 
for example, as wheat and flour, live animals and dressed 
meats, pig iron and hardware, and scores of others, the most 
important interests are in constant dependence. A slight in¬ 
crease, for instance, in the rates on flour with a slight de¬ 
crease in the rates on wheat might transfer to eastern points 
the great milling industries of the Northwest and reduce the 
business in a city like Minneapolis to the limited demands of 
its local trade. So an apparently inconsiderable variation 
in the relative charges on dressed meats and live animals 
might shift the location of every large slaughterhouse from 
one part of the country to another, with resulting confusion 
and loss beyond the reach of redress.” 81 

The foregoing appeared as a part of a plea for entrust¬ 
ing to the Commission the enormous power which was al- 

(80) Eleventh Annual (1897) Report, p. 15. 

(81) Ninth Annual (1895) Report of the Interstate Commerce 
Commission, pp. 15, 16, 17. 


35 



leged to be in the hands of the rate-making officers of 
the railways. But even in making this plea the Com¬ 
mission found it expedient to admit that “these illustra¬ 
tions may be extreme,” when applied to the limited con¬ 
trol of rates exercised by railway officers, that commer¬ 
cial conditions constitute a strong check upon wrongful 
exercise of such powers, and that instances of improper 
exercise were infrequent. The report quoted said, in 
the same connection: 

“Of course there are various conditions—commercial and 
otherwise—which act in most cases as checks upon arbitrary 
conduct; and even where such safeguards do not appear to 
exist it stands to the credit of railway managers that they are 
rarely chargeable with wanton extortion. 

* * * * * * * 

“In view of the opportunities, and the temptations to 
which their traffic officers are exposed, it is perhaps not too 
much to say that the obligations of neutrality in this regard 
are usually observed, and that discriminations of this char¬ 
acter are not often the subject of complaint.” 82 

These checks operate, then, effectively and with a 
measurable degree of satisfaction to railway patrons, upon 
railway officers when the latter make rates, subject to the 
rules of the law and to free negotiation with the purchas¬ 
ers of transportation. If, on the other hand, the power 
to make these rates, involving this tremendous power 
over commerce and Society, is placed in the hands of an 
appointive governmental board, what checks remain ? 
Certainly such a board is subject to no commercial check 
and even the political check is minimized where there is 
no direct responsibility to any constituency. That mis¬ 
takes of far-reaching consequences are not impossible is 
suggested by the following expression of the Supreme 
Court: 

“The effort of the Commission, by a rigid general order, to 
deprive the inland consumers of the advantage of through 
rates, and to thus give an advantage to the traders and manu¬ 
facturers of the large seaboard cities, seems to create the 
very mischief which it was one of the objects of the act to 
remedy.” 83 

Commissioner Prouty, speaking for the Commission, in 
a report and opinion rendered on April i, 1903, 84 pro¬ 
pounded and answ r ered, among others, three inquiries 

(82) Ninth Annual (1895) Report, pp. 16, 17. 

(83) Texas and Pacific Railway v. Interstate Commerce Com¬ 
mission, (1896) 162 U. S. 197, 221, 222. 

(84) In the Matter of Proposed Advances in Freight Rates, 9 
I. C. C. Rep. 382. 


36 



which, it may be suggested, involve quite unmistakably, 
broad questions of public policy requiring, if not settled by 
the fundamental law of the Constitution, legislative discre¬ 
tion for their determination. These questions were: 

“The government of the United States could probably bor¬ 
row what money would be needed to buy or build the rail¬ 
ways of this country at from 2 1-2 to 3 per cent. Ought the 
public to be taxed for the service rendered beyond this rate of 
interest ?” 85 

“Moreover, the value of a railway system does not depend 
upon the mere cost of its embankment or its equipment. It is 
rather a question of location, of connections, of terminal fa¬ 
cilities, of enterprises along its line; and shall nothing be al¬ 
lowed to the foresight and ability which have marked out and 
perfected that system ?” 86 

“Ought not a railway to be allowed to accumulate in some 
form, a surplus during fat years which may tide over subse¬ 
quent lean years ?” 87 

These questions are typical of those which must arise 
when the rate-making body is not more definitely in¬ 
structed than by the declaration, which by no means adds 
to the law as it has always stood, that rates shall be rea¬ 
sonable and just. A single and narrow phase of the 
power to determine such fundamental questions and to 
issue a fiat, containing the determination was described 
by Judge Grosscup in a recent opinion of the Circuit 
Court for the Northern District of Illinois as involving: 

“power, by the use of differentials, to artificially divide up 
the country into trade zones tributary to given trade and 

(85) Answered in the affirmative, 9 I. C. C. Rep. 382, 402. 

(86) Answered, that something may be allowed, 9 I. C. C. Rep. 
382, 402, 403, 404. 

(87) The opinion continues: “To this we would unhesitatingly 
answer in the affirmative. In times like the present a railroad 
company should be allowed to earn something more than a merely 
fair return upon the investment.” This seems to be equivalent 
to saying that an unfair return should be allowed in “fat years.” 
Probably Commissioner Prouty meant to say that the rate of re¬ 
turn which is “fair” in prosperous years is not limited to what 
may have been earned in years of depression. It is hardly pos¬ 
sible that he meant that the Commission or Congress could im¬ 
pose upon the carriers, in “lean years” a schedule of rates that 
would produce a smaller rate of return on the investment than the 
same carriers must be permitted to earn in “fat years.” Or did he 
mean that the earnings, and value for a long series of years, in¬ 
cluding periods of prosperity and adversity alike, should be com¬ 
pared and that the average rate of return for the whole period 
ought to be a fair one? Evidently the settlement of this question, 
in any aspect, is one calling for an exercise of exclusively law¬ 
making power, perhaps, of a character not granted to Congress by 
the Constitution. 


37 



manufacturing centers, the Commission, in such cases having, 
as a result, power to predetermine what the trade and manu¬ 
facturing centers shall be; * * * * a power vaster than 

that any one body of men has heretofore exercised, * * * 

putting in the hands of the Commission the general power of 
life and death over every trade and manufacturing center in 
the United States.” 88 

In the exercise of this indefinite and extraordinary au¬ 
thority the Commission has found that even the very gen¬ 
eral standards which it assumes to have set up cannot al¬ 
ways be applied. The following from the Annual Re¬ 
port for 1907 illustrates this: * 

“While these rates seemed high to the Commission and 
much in excess of the average passenger rates, the conditions 
and situation of this road are very peculiar for a road of its 
length. It is practically without branches, unfinished, and 
without southern connections which are necessary alike to 
enable it largely to increase its business and to satisfactorily 
serve the public. Having recently defaulted in the payment 
of its interest charges and in consequence been reorganized, 
it is still a question as to whether it will be able to meet its 
obligations in the future. It is to be hoped that if it does it 
may soon reach a point when these rates can and will be re¬ 
duced with reasonable certainty that its solvency will not 
thereby be impaired. While the Commission was not sure 
that a reduction of rates might not result in equal or greater 
revenues from passenger traffic, it hesitated for the present, 
under all the circumstances, to make an order in this case 
which might have a contrary effect, and the complaint was 
therefore dismissed.” 89 

Although the Commission proceeds in rate cases only 
upon complaint and there must be a “full hearing” 90 
neither party ever knows precisely what constitutes the 
record upon which the decision of the Commission will be 
based. Lawyers who are not familiar with the practice 
will be interested to learn that: 

“the determination of almost every case requires consid¬ 
eration of conditions, tariffs, and statistics which are not pre¬ 
sented to the Commission,” 

and that: 

“the information necessary to intelligent action by the 
Commission can frequently be obtained from a verbal inter¬ 
view with the head of the appropriate division,” 


(88) Chicago, Rock Island and Pacific Railway v. Interstate 
Commerce Commission, (1909) 171 Fed. 680, 683, 684. 

(89) Twenty-first Annual (1907) Report, p. 46. Reference is to 
Railroad Commission of Arkansas v. St. Louis and Northern Ar¬ 
kansas Railroad, 12 I. C. C. Rep. 233. 

(90) Section 15. A complaint will not be necessary after the 
act of June 18, 1910, takes effect. 

38 




of the Commission’s office. 91 Those who apprehend the 
full significance of these extracts will be prepared to esti¬ 
mate the public importance of the fact that, without ex¬ 
ception, the appointees to membership in the Commission 
have, from the beginning, been men of exceptional in¬ 
telligence and capacity, of remarkable industry, of pro¬ 
found discretion, of the highest integrity, of the coldest 
impartiality, and of the most sincere patriotism. With¬ 
out all these qualities they could scarcely have sustained 
the responsibilities of so great a trust. 

But even these qualities do not make the “judgment, 


(91) Twenty-second (1908) Annual Report of the Interstate 
Commerce Commission, pp. 9-10.—The full statement on this sub¬ 
ject is as follows: “Practically every complaint, formal or infor¬ 
mal, which comes before the Commission requires examination of 
tariff files and statistical reports of the carriers for the purpose of 
determining whether or not the complaints are well founded and 
accurately stated. With the present unification of these several 
branches of the work such reports are obtained in very short time. 
In fact, the information necessary to intelligent action by the 
Commission can frequently be obtained from a verbal interview 
with the head of the appropriate division, and in a great many in¬ 
stances no further research is necessary. In this connection it 
should be remembered that for the heads of its tariff and statis¬ 
tical divisions the Commission has chosen practical railroad men. 
******* 

“Moreover, it must be remembered that the commission can sel¬ 
dom, if ever, decide a case merely upon the evidence presented 
to it. In this respect it is radically different from a court. The 
ordinary court determines only the rights of the parties before it, 
but every decision of the Commission involves the rights of par¬ 
ties who are not present. Any important readjustment of rates 
applies not only to the complainant but also to all shippers under 
those rates, and frequently, as a commercial necessity, to carriers 
who are not before the Commission in a particular case; and in 
addition to the evidence actually presented to the Commission, it 
must consider the effect of a ruling in any given case upon car¬ 
riers, shippers, or localities who are not represented. It is ob¬ 
vious, therefore, that the determination of almost every case re¬ 
quires consideration of conditions, tariffs, and statistics which are 
not presented to the Commission, but which it must take notice of 
in order to faithfully perform its duty, and the proper expedition 
of the Commission’s work requires that these aids to the final de¬ 
termination of cases arising before it should be as easy of access 
as possible. It is, perhaps, not too much to say that not a single 
case arising before the Commission could be properly decided if the 
complainant, the railroad, or the Commission were bound by the 
rules of evidence applying to the introduction of testimony in 
courts.” The New York Court of Appeals condemned this informal 
mode of procedure, under the laws of that state, in Saratoga 
Springs v. Saratoga Gas, Electric Light and Power Company, 191 
N. Y. 123, 18 L. R. A. (N. S.) 713, 724, 725. 


39 



wisdom and patriotism’'' of the Commission a satisfac¬ 
tory substitute in legislative matters for the constitu¬ 
tional discretion of the elected representatives of the peo¬ 
ple. That “the fixing of rates is essentially legislative in 
its character” 92 has been declared so often and is so fa¬ 
miliar a rule that it is not worth while to multiply au¬ 
thorities. If there were no authorities the nature of the 
power would be plain from the statements of the conse¬ 
quences of its exercise and of the character of the ques¬ 
tions that arise in the course of determining reasonable 
rates that have been quoted. It is not only a legislative 
power but it is so strongly legislative that the act of 
exercising it transforms into a legislature, a body created 
as a court, sitting as a court and proceeding as a court. 

“The establishment of a rate is the making of a rule for 
the future, and therefore is an act legislative, not judicial, 
in kind. * * * * 

“Proceedings legislative in nature are not proceedings in a 
court, within the meaning of Revised Statutes, Section 720, 
no matter what may be the general or dominant character of 
the body in which they may take place. 

******* 

“And all that we have said would be equally true if an 
appeal had been taken to the Supreme Court of Appeals and 
it had confirmed the.rate. Its action in so doing would not 
have been judicial, although the questions debated by it might 
have been the same that might have come before it as a court, 
and would have been discussed and passed upon by it in the 
same way that it would deal with them if they arose after¬ 
ward in a case properly so called. We gather that these are 
the views of the Supreme Court of Appeals itself. 

* * * * * * * 

“The question to be decided, we repeat, is legislative, 
whether a certain rule shall be made. Although the appeal is 
given as a right, it is not a remedy, properly so called. At 
that time no case exists. 

******* 

“If the rate should be affirmed by the Supreme Court of 
Appeals and the railroad still should regard it as confiscatory, 
it will be understood from what we have said that they will 
be at liberty then to renew their application to the Circuit 
Court, without fear of being met by a plea of res judicata ,” 83 

If such considerations as those herein submitted should 
lead the Supreme Court of the United States to hold that 
Section 15 of the interstate commerce law includes an 
unconstitutional effort to delegate legislative power it 

(92) McChord v. Louisville and Nashville Railroad, (1902) 
183 U. S. 483, 495. 

(93) Mr. Justice Holmes, for the majority of the Supreme 
Court, Prentis v. Atlantic Coast Line, decided on November 30, 
1908, 211 U. S. 210, 53 L. ed. 150. 


40 



would not follow that the whole power of the Commis¬ 
sion over railway charges and practices would fail. Pow¬ 
er was very effectively exercised by the Commission when 
it acted in aid of the Federal courts, preparing findings of 
fact and making a general order which, though usually 
voluntarily obeyed, could be enforced in a suit brought 
by the Commission or by any party in interest. Though 
the Commission no longer makes findings of fact which 
have the weight of prima facie evidence the Circuit Courts 
of the United States still have power to enforce its orders 
on proper application and after investigation. And the 
enforcement of such orders, even though they are intend¬ 
ed to control future rates is a proper judicial function. 94 
Provision for such procedure, strengthened as it now is 
by authority to make orders much more definite in terms 
than were permitted formerly, is probably as far as Con¬ 
gress can effectively legislate for the control of rates un¬ 
less it chooses itself to prescribe, as far as the Constitu¬ 
tion permits, the maximum rates to be observed. Though 
it has sometimes been asserted that it would be “imprac¬ 
ticable” for Congress directly to exercise whatever power, 
in this respect, it may possess, it is a fact that the Eng¬ 
lish Parliament has enacted maximum rates for England 
and we know that the diligence and ingenuity of that 
great legislative body does not excel those of the Ameri¬ 
can Congress. 95 

Just a few words will be added concerning the author¬ 
ity granted in Section 20, to prescribe a uniform system 
of accounts. If the purpose for which these accounts are 
intended were plainly declared in the statute and could be 
assumed so thoroughly to control the discretion to be ex¬ 
ercised in formulating the system, as to make the func¬ 
tion ministerial, this grant of power could not be ques¬ 
tioned. But the Commission has assumed to exercise it 


(94) Cincinnati, New Orleans and Texas Pacific Railway v. 
Interstate Commerce Commission, (1896) 162 U. S. 184, 189; Illi¬ 
nois Central Railroad v. Interstate Commerce Commission, (1907) 
206 U. S. 441; Missouri Pacific Railway v. United States, (1903) 
189 U. S. 274; Interstate Commerce Commission v. Lake Shore and 
Michigan Southern Railway, (1905) 197 U. S. 536, 543. 

(95) A very experienced and practical legislator, Honorable 
Stephen B. Elkins, Senator of the United States from West Vir¬ 
ginia, thinks that Congress is not without the capacity to enact 
a schedule of maximum railway rates. See Minority Report of 
the Committee on Interstate Commerce of the United States Sen¬ 
ate on H. R. 12987 (the Hepburn bill) Senate Document 1242, 
Part 2, Fifty-ninth Congress, First Session, pp. 5, 6. 


41 



in a manner which, if it must be considered as intended 
by the terms of the statute, is absolutely destructive to 
any such theory. The right to require the setting up of 
new accounts, not desired by the carriers, which do not 
represent actual transactions but merely record 
estimates based upon necessarily inadequate data, 
has been asserted by the Commission and orders requir¬ 
ing such accounts have been formally issued. 96 It has 
been considered that there are “possibilities of supervi¬ 
sory control” of railway properties and practices lying 
within the “administration of a prescribed system of ac¬ 
counting” and that to utilize them the Commission must 
promulgate “accounting orders” involving the determina¬ 
tion of “broad and comprehensive questions of public 
policy.” 

“The financial accounts for all agencies of transportation 
have been brought to a point at which general questions of 
public policy, as well as technical questions of accounting, 
claim consideration. It is regarded as a significant fact, and 
one which suggests the possibility of supervisory control 
which lie in the administration of a prescribed system of ac¬ 
counting for public-service industries, that the further ac¬ 
counting orders of the Commission involve broad and compre¬ 
hensive questions of public policy.” 87 

(96) “The most important principle embodied in the new sys¬ 

tem of acounting is found in the fact that carriers are required to 
set up formal depreciation accounts in operating expenses for all 
classes of equipment.”—Statistician to the Interstate Commerce 
Commission, Nineteenth Annual (1906) Report on the Statistics 
of the Railways, p. 11. Of course the entries in such accounts 
must be mere guesses. A “committee of the American Railway As¬ 
sociation * * * * strongly urged upon the Interstate Com¬ 

merce Commission the abandonment of the rules and accounts in¬ 
volving the formal recognition of depreciation charge in operating 
expenses.”—Statement of Professor Henry C. Adams, Statistician 
to the Commission, Proceedings of the Twentieth Annual (1908) 
Convention of the National Association of Railway Commissioners, 
pp. 141, 142. 

(97) Twenty-second Annual (1908) Report of the Interstate 

Commerce Commission, p. 82. The following from the Twenty- 
first Annual (1908) Report on Statistics of Railways is also sig¬ 
nificant: “The chief difficulty in drafting a satisfactory balance- 
sheet statement arises from the different, and to some extent con¬ 
flicting interests concerned, which, for the sake of explicit state¬ 
ment, may be defined as:—( a) The interest of the management; 
(b) the interest of the investor, and (c) the interest of the pub¬ 
lic. * * * * The Form of General Balance Sheet Statement 

submitted to the Commission and promulgated under an order of 
June 21, 1909, was constructed, primarily, under the influence of 
the third interest above described.” Surely, in a country in which 
all have equal rights, no authority less than the legislature can 
prefer one “interest” over another. 


42 



It may be that the significance of the fact lies in its 
strong suggestion that either the Commission has too lib¬ 
erally construed its powers under Section 20, or Con¬ 
gress has undertaken to delegate a power which only the 
law-making body can constitutionally exercise. 


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